Privelege of being an accountant;

Page 1

by Harry R.Weyrich It is surely an honor and a privilege —
and, indeed, a right —to be held
accountable for excellence in the
accomplishment of one's professional
duties. However, as independent public
accountants we face penalties under
existing laws and rules which make us
legally liable for failure to achieve
and maintain such excellence.
This exposure to legal liability,
which is so intimately linked to our
professional sense of responsibility,
is a fundamental component of the
profession's ethical structure. While
we may look upon such responsibility
as a mark of distinction, it is also a
sign of the seriousness of our auditing
duties and proof of the significance of
our role in society. Liability thus
becomes a spur to our pursuit of
excellence, a form of discipline.
One outcome of our exposure to liability
penalties has been the recent plethora
of class-action suits against accounting
firms.These suits are developing in
such volume that insurance underwriters
have openly questioned how long they
can maintain an interest in providing
insurance coverage at reasonable
premium rates.
The economic threat represented by
lawsuits to which all accounting firms
are becoming exposed is substantial
indeed. There can be no avoiding the fact
that the sheer dollar amounts of these
suits could threaten the existence of
the professional practice of auditing as
an economic undertaking. No profession
could hope to survive indefinitely under
the kind of punishment that would occur
if substantial damages were awarded in
many of these cases.
A large percentage of all legal actions
involving accountants originate from
the public sale of securities for which
a prospectus containing financial
statements is used. A formula must be
found, and I'm sure it will be found,
to limit the liability of accountants
through a ceiling based upon dollar
amounts of such issues. This could be
accomplished by an amendment to the
Securities Act of 1933 in much the
same way that the liability for damages
of each underwriter is limited to the
total price at which securities
underwritten by him were offered and
distributed to the public. As matters
now stand, the accountant's fee has no
relation to the quality of the package
being sold or the amount of the issue.
I he need for such limitation is found
in a pattern of action now taking clear
form. With increasing frequency, the
Securities and Exchange Commission is
filing permanent injunction suits
against companies, citing specific
violations of securities laws and
seeking to enjoin any future occurrence
of such violations. If the injunction is
granted by the court, and more often
than not it is granted, the company is
compelled to amend its reports including
the financial statements, assuming the
SEC charges are sustained.This is
usually done without admitting or
denying the allegations.
the privilege of being accountable
24